Analysis shows low tax burden

Report says local costs third-lowest in region

critics reject findings

Howard County

December 14, 2004|By Larry Carson | Larry Carson,SUN STAFF

Although Howard residents have been hit with a big income tax increase and face skyrocketing property values, a budget office analysis shows their local tax bills are among the lowest in the region.

Howard's local tax bill remains third-lowest among metropolitan subdivisions, just above Anne Arundel and Baltimore counties, despite an income tax increase last year that brought Howard's rate to the legal limit of 3.2 percent.

"The question we were trying to answer is: If you are a Howard resident, what is your tax rate comparable to somebody else - if you picked them up and plopped them down in another place?" said Raymond S. Wacks, Howard's budget director, who produced the analysis.

"It's a guideline and informational thing. It's not perfect," Wacks said.

Several critics agree.

As benchmarks, the survey uses Howard's median house value of $395,750 and household income of $82,900, prompting complaints that such high figures are not accurate when applied to other jurisdictions. Four years ago, when Wacks did a similar survey, the median Howard house value was $176,500 and the median household income was $69,200.

Separate measures

Wacks' survey includes six separate charts measuring property tax, income tax, additional fees and taxes, savings from the property assessment caps, total tax burden, and taxes as a percentage of each jurisdiction's median household income. Another version of the property tax chart added municipal property taxes for counties with small cities, such as Annapolis, Frederick, Rockville and Columbia, where residents pay a property tax-like fee.

Doug Brown, Baltimore's public policy analysis supervisor, said the survey is technically flawed.

"At best, it's impossible to do studies that make assumptions that everything's the same because they're not," he said. The true cost of items as small as telephone taxes or as large as home values varies, he said, and real estate tax bills and revenues are affected by how accurate state assessments are.

Not rigorous, but valid

But John Hopkins, an economist with Towson University's Regional Economic Study Institute, said the survey's results, although not scientifically rigorous, are valid.

"Any perception that Howard has a heavy increase in tax burden isn't really true," he said, although he conceded that a comparison with Baltimore, given the city's wide variation of incomes and property values, might not be fair.

The survey shows Anne Arundel County homeowners bear Central Maryland's lightest tax burden, at $4,910 per household, and Baltimore residents bear the highest, at $8,952.

Wacks said Howard's 5 percent property assessment cap - half the state's maximum - is responsible for the county's relatively low ranking, compared with (in order) Baltimore City, Montgomery, Prince George's, Frederick, Harford and Carroll counties, which all charge taxpayers more.

Fred Homan, director of budget and finance for Baltimore County, said the 4 percent assessment cap there is crucial to keeping the tax burden low, along with the county's frugal approach to spending.

"Right now is the period of time when the cap is so important," Homan said, because of sharply rising property values in Maryland.

Anne Arundel County has the lowest taxes, thanks to the area's lowest income tax rate (2.56 percent), and an even more restrictive cap limiting increases in overall property tax revenue to 4.5 percent a year or the rate of inflation (now 3 percent), whichever is lower.

"Home values are among the highest and the tax burden is among the lowest," said John R. Hammond, Anne Arundel's budget director.

The Wacks comparison highlights the way local property and income tax rates and caps - and trash, utility and fire service fees - affect what people pay.

Although Baltimore City, for example, has the area's highest property tax rate, its assessment cap is low, matching Baltimore County at 4 percent. Anne Arundel and Prince George's counties have even tighter limits on property tax increases.

Carroll, Harford, Montgomery and Frederick counties have reaped more new revenue from rising property values by using the state's maximum 10 percent assessment cap. Carroll recently lowered its rate for next year to 7 percent.

If municipal taxes are included for small cities such as Frederick, Annapolis and Rockville, including Columbia's property tax-like lien fees, Frederick imposes more taxes ($8,982) than Baltimore ($8,952), Wacks found.

Critics perceive flaws

But critics such as Jon Angel, Frederick's budget director, and Del. Gail H. Bates, a western Howard Republican, say Wacks' survey is flawed.

Angel argued that because his city's median home value ($210,000) and household income ($59,000) are much lower than Howard's, residents there pay less in taxes than the survey shows.

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